The Washington-based International Monetary Fund (IMF) has warned that Algeria’s increased government spending in 2018 may create risks for the long-term economic outlook.

The fund said is “will likely exacerbate fiscal and external imbalances, raise inflation, accelerate the loss of international reserves, heighten financial stability risks and, eventually, lower growth”.

Instead, the IMF said that instead of central bank financing, Algiers should rely on a broader range of financing options, including external borrowing to finance well-chosen investment projects.

The comments came as the IMF concluded its Article IV consultation with Algeria. Its concluding statement at the end of the visit said that overall, Algeria continues to face important challenges posed by lower oil prices.

Real GDP growth slowed sharply, mainly driven by a contraction in hydrocarbon production, although growth in the nonhydrocarbon sector was stable. The fiscal and current account deficits remain large.

Unemployment increased to 11.7 per cent in September 2017 from 10.5 in September 2016 and remains particularly high among the youth (28.3 per cent) and women (20.7 per cent).

Average inflation declined from 6.4 per cent in 2016 to 5.6 per cent due to slowing inflation for manufactured goods and services, and stood at 3.4 per cent year-on-year in April 2018.

Reserves fell by $17bn to $96bn. External debt remains negligible, while domestic public debt has increased significantly since 2016 but the IMF says it remains moderate.